RBI paper says Basel norms proved positive for Indian bks in long run

Informist, Tuesday, Jan 11, 2022


MUMBAI – While the implementation of the Basel-I capital had triggered an unfavourable reaction from investors, the fact that Basel-II and Basel-III norms led to a rise in stock prices of banks suggests that implementing these global regulations had a favourable impact on the banking sector in the long run, according to a Reserve Bank of India working paper.


The paper, titled 'Stock Price Reaction on the Announcement of Basel Implementation: Evidence from Indian Banks', is part of the working paper series in which RBI officials often carry out research collaboratively with other experts.


The paper is authored by Gaurav Seth, Supriya Katti and B.V. Phani. Seth is an assistant general manager at the central bank, while Katti is a project scientist and Phani is professor at Indian Institute of Technology, Kanpur.


"The policy decisions with respect to Basel II and III, in general, received a positive reaction with small deviations in some of the event windows in the short run. The multivariate analysis does not show any significant impact of bank specific characteristics on the market performance of various events confirming the strong announcement effect," the paper said.


It added that investors showed confidence in the RBI's policy decision of aligning Indian bank regulations with global best practices of Basel capital adequacy norms.


This was in sharp contrast to the Basel-I scenario, when Indian banks were not prepared to raise the capital to 9%, and led to an overreaction from markets, which were largely pessimistic. But the long-term gains and the experience from this event meant banks were better prepared for the subsequent changes in capital norms under Basel-II and Basel-III.  End


Reported by T. Bijoy Idicheriah

Edited by Avishek Dutta


Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.


Informist Media Tel +91 (11) 4220-1000

Send comments to


© Informist Media Pvt. Ltd. 2022. All rights reserved.

Other News

Gland Pharma to repurpose vaccine unit for biologics contract mfg

Informist, Monday, May 23, 2022 By Narayana Krishna HYDERABAD – As the COVID-19 portfolio is no longer seen as an attractive proposition, Gland Pharma Ltd has put on hold its plans to manufacture Sputnik vaccine and is exploring the possibility of using its newly created infrastructure to make biologic drugs for others, a source told Informist. In March last […]

Gujarat State Petro commissions 1,380-km pipeline after 7-year delay

Informist, Monday, May 23, 2022 By Sunil RaghuAHMEDABAD – After a delay of nearly seven years, Gujarat State Petronet Ltd started commercial operations of its 1,380-km Mehsana-Bhatinda gas pipeline late last week, sources told Informist. Bharat Petroleum Corp Ltd, which is the first customer, started receiving gas for its city gas distribution network in Rohtak from Wednesday.Even though the […]

Economists expect govt to miss FY23 fisc gap aim post excise duty cut

Informist, Monday, May 23, 2022 NEW DELHI – Most economists expect the government to miss its fiscal deficit target for 2022-23 (Apr-Mar) due to recent measures to control runaway inflation, primarily the cut in excise duty on petrol and diesel. They peg the fiscal deficit for the year at 6.7-6.9% of GDP, against the Budget estimate of 6.4% of GDP, […]